IFRS 4

IFRS 4 specifies some aspects of the financial reporting for insurance contracts by any entity that issues such contracts and has not yet applied IFRS 17. 

An insurance contract is a contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder.

IFRS 4 applies to all insurance contracts (including reinsurance contracts) that an entity issues and to reinsurance contracts that it holds, except for specified contracts covered by other Standards. It does not apply to other assets and liabilities of an insurer, such as financial assets and financial liabilities within the scope of IFRS 9. Furthermore, it does not address accounting by policyholders.

IFRS 4 exempts an insurer temporarily (ie until it adopts IFRS 17) from some requirements of other Standards, including the requirement to consider the Conceptual Framework in selecting accounting policies for insurance contracts. However, IFRS 4:

  • prohibits provisions for possible claims under contracts that are not in existence at the end of the reporting period (such as catastrophe and equalisation provisions);
  • requires a test for the adequacy of recognised insurance liabilities and an impairment test for reinsurance assets; and
  • requires an insurer to keep insurance liabilities in its statement of financial position until they are discharged or cancelled, or expire, and to present insurance liabilities without offsetting them against related reinsurance assets.

A 2016 amendment to IFRS 4 addresses some consequences of applying IFRS 9 before an entity adopts IFRS 17.

What is the difference between IFRS 4 and IFRS 17?


IFRS 17 replaces IFRS 4
, which currently permits a wide variety of practices. IFRS 17 will fundamentally change the accounting by all entities that issue insurance contracts and investment contracts with discretionary participation features.

Is IFRS 4 still applicable?


IFRS 4 was issued in March 2004 and applies to annual periods beginning on or after 1 January 2005. IFRS 4 will be replaced by IFRS 17 as of 1 January 2023.

What is IFRS 4 disclosure all about?


IFRS 4 defines an insurance contract as a “contract under which one party (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder.”

What is IFRS 4 explain?

This is a contract under which a party (the issuer) accepts significant insurance risk from the other party (the policyholder) by approving to reimburse the policyholder in case of a specified (the insured event) uncertain future event unfavorably affects the policyholder.